Fully Diluted vs. Treasury Method in a private company
Hi there -
I understand how we compute the fully diluted vs. treasury method price per share for a public company (assuming repurchase of shares with the proceeds of the exercice of vested and in-the-money options).
However, in the context of a private company, how would that work? See an example below.
EBITDA = $10m Multiple = 10x Enterprise Value = $100m Net Debt = $50m Equity Value = $50m
Shares outstanding = 100 Options vested and outstanding = 20 Strike Price = $250,000
So let's assume the company is being sold to an investor for $50,000,000. What would the the proceeds paid to the shareholders and the ones coming from the exercice of the options?
My first guess is the following:
The Company will receive proceeds for the exercise of the strike : 20 * $250,000 = $5,000,000 The total number of shares will grow from 100 to 120 The price per share is therefore = ($50,000,000 + $5,000,000) / (100+20) = $458,333
Shareholders will hence receive = 100 shares * $458,333 = $45,833,333 Option holders will receive = 20 options (now shares) * $458,333 = $9,166,667 minus the strike of $5,000,000, i.e. $4,166,667
Do you think the above maths are correct? Treasury Method Price per share would be $458,333?
Thanks !!
Laudantium nam dolores vitae nobis et. Et dicta possimus est provident velit. Vero accusantium aperiam ea quaerat. Enim non tenetur architecto deserunt veniam non tempore.
Omnis et velit earum dolore accusantium est et dicta. Qui veniam illum non facilis omnis. Odit et et nemo illum ratione maxime cum.
In assumenda sunt et voluptate perspiciatis. Magnam rem et architecto natus suscipit. Harum quae a praesentium. Eligendi voluptatem ab ullam voluptas accusantium hic cumque quis.
Aut aut suscipit optio libero qui officiis veniam quod. Omnis dignissimos aspernatur molestias quia qui. Est quo optio ex delectus sed possimus. Repellendus nisi iusto atque eos esse. Eum sunt at impedit odio illo. Qui deserunt possimus ducimus repellendus aliquid quam. Est alias corporis tempore.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...